Holiday Scams and Frauds – Part V: Advance-Fee Loan Businesses

capital corp merchant banking scam, capital corp merchant banking fraudThe holidays continue to be a prime target time for scammers to take advantage of people at their most vulnerable; when they are stressed and pressed for time.

Sometimes small business owners have had a bad year and they just want to get a loan to tide them over for a short while until business picks up again or until their ‘high season’ comes back around. In a former article we brought up the subject of funding scams and now we’re talking about advance-fee loan scams, which are highly similar but target mainly small businesses, and the businesses that are recognized to carry out these scams.

Advance-fee loan scans target individuals and small business owners desperate to get a loan and often take the victim for thousands of dollars.  Most people come across them through ads in local publications and online through classified ads.  These ads don’t last long and will pop up again under a different name and fake business address.  Here’s the tricky part: the websites for these businesses sometimes actually can look quite professional, but where it goes wrong is when you get to the application forms, which will generally ask very pointed questions, such as your bank account and social security numbers.  Victims will be deemed ‘approved’ for the loan and asked for ‘advance’ fees, or ‘priority’ fees or ‘premium’ fees, and this can run into thousands and sometimes tens of thousands of dollars.  Those who pay never get the promised loan and can be even tricked into giving the scammers even more money.

If you come across these businesses, it is recommended to denounce them.  The warning signs remain the same: lender has a bad reputation – or no reputation; the lender is not registered; you are asked to wire money or send a money order before you can receive the loan; be wary of applying through unfamiliar businesses or websites; the address is a mail-to or PO Box; and be wary of the ‘shiny factor’ – even if the website looks really professional and they talk a big game, it doesn’t make it legit.  Do your homework and stay safe.  For more information, check out the BBB’s warnings.

Always make sure that you make an informed decision in all cases,

All the Best,

The Capital Corp Team


One thought on “Holiday Scams and Frauds – Part V: Advance-Fee Loan Businesses

  1. Hi CCMBO, I enjoyed your article and I agree in some of your points. But there are moments and reasons why most private lenders require advance fees. They look to cover bank’s and other costs, and to build significance and urgency into the borrower. Otherwise some borrowers “jerk around” and waste the lender’s time. It is a good way to “weed out” non serious borrowers. I can tell from experience where the borrower jerked around for three months and at the end wanted to change the terms of the contracts that they already approve and sign. The lender already assigned the funds to the borrower and the bank had to retrieve the money, accumulating a little over one hundred thousands dollars in losses. I spent over 60 hours every week on this client since I did not charge an advance fee, I lost thousand of dollars.

    I also know a great lending group that require advance fees so that they cover costs in advance and do not be lurched around by borrowers. They are a very successful team as they have disbursed billion of dollars in private loans. Many in the industry criticize them for this practice but I respect them because it is a simple take or leave it mentality.

    Also, keep in mind that in many cases these fees are refundable and that sometimes they are not for the loan itself but for requested extra work on the borrower’s behalf.

    I hope that you do not misinterpret my points but they are real life experiences and not everyone that require advance fees are scammers.


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